Pending before the Court are Motions for Summary Judgment from Plaintiffs (Doc. 109) and Defendants (Doc. 100). For the following reasons, Plaintiffs' Motion is granted and Defendants' Motion is denied.

BACKGROUND

Plaintiffs in this action are fiduciaries of a self-funded employee welfare ERISA plan (the "Plan"), in which James Joseph Lancaster participated. (Doc. 109 at 2.) The Plan provides for payment of a covered person's medical expenses but grants the Plan a right of subrogation and reimbursement in the event that a third party is legally responsible for the payment of the medical expenses paid by the Plan. ( Id. at 3; Doc. 110 at ¶ 7.) The Plan provides that its right of subrogation is "first dollar recovery, " giving it a right to recovery before payment for any other claim, including attorney's fees, general damages, or other damages other than medical expenses. (Doc. 109 at 3; Doc. 110 at ¶ 8.) The Plan also provides for reimbursement to the Plan if the third-party payment comes through the covered person's estate, anyone acting on behalf of the covered person, or anyone who has had benefits paid by the Plan. (Doc. 110 at ¶ 7-8.) The Plan requires that a covered person or their estate or representative must assign rights of recovery to the Plan and take other affirmative steps in order to avoid prejudicing the Plan's right to reimbursement. ( Id. at ¶ 9.)

Plaintiffs seek to recover $1, 144, 862.20 paid on behalf of Mr. Lancaster for injuries he suffered as a result of medical procedures at Banner Heart Hospital (the "Hospital"). ( Id. ) Mr. Lancaster filed suit in Arizona state court, via his guardian ad litem, against the Hospital, Dr. Jonathan A. Feuer, and Valley Anesthesiology for recovery for his injuries (the "Malpractice Litigation"). Mr. Lancaster died before resolution of his claim ( Id. ; Doc. 101 at ¶ 13-14.), after which the Estate of Mr. Lancaster, through Defendant Jennifer N. Lancaster, as Personal Representative, was substituted into the Malpractice Litigation to pursue recovery. (Doc. 109 at 2; Doc. 101 at ¶ 21, 23.)

On October 4, 2011, the Estate, along with Mr. Lancaster's surviving children and parents, who were asserting their own claims, settled a portion of the Malpractice Litigation with the Hospital (the "First Settlement"). (Doc. 110 at ¶ 19; Id. at Ex. A.) The Plan was not consulted regarding the First Settlement. ( Id. at ¶ 22.) After the First Settlement, the Personal Representative of the Estate asked for approval from the Probate Court to have the Estate dismissed from the Malpractice Litigation. (Doc. 117 at ¶ 24.) The Plan objected to the Estate being dismissed from the Malpractice Litigation on the grounds that it would impair the Plan's right to reimbursement. (Doc. 110 at ¶ 25.) The Plan also filed the instant lawsuit for breach of contract, recognition of a constructive trust, and declaratory and injunctive relief, all pursuant to Section 502(a)(3) of ERISA. (Doc. 1.) The Plan also filed a motion for a Temporary Restraining Order (TRO) to enjoin the Estate from dismissing itself from the Malpractice Litigation and to preserve in trust from any settlement proceeds the Plan's reimbursement interest in $1, 144, 862.20. (Doc. 37.) As a stipulation filed on March 8, 2012 before this Court, Defendants agreed to sequester any and all settlement proceeds recovered or to be recovered in the Malpractice Litigation. (Doc. 35 at ¶ 2.)

On April 23, 2012, the Estate, along with Mr. Lancaster's surviving parents and children, entered into a preliminary settlement memorandum with Dr. Feuer and Valley Anesthesiology in the Malpractice Litigation (the "Second Settlement"), which provided the basic terms of the agreement but stated that "formal settlement documents" would be executed at a later date. ( Id. at ¶ 27-28.) On May 1, 2012, the Plaintiffs contacted the Defendants to request that they recognize the Plan's right of recovery against third parties, and formalize this assignment of interest so that the Plan could "intervene in the [Malpractice Litigation] to pursue its right of recovery." (Doc. 117 at ¶ 29; Doc. 110 at ¶ 29.) The next day, counsel for Defendants informed Plaintiffs that the Malpractice Litigation had settled. (Doc. 117 at ¶ 30; Doc. 110 at ¶ 30.)

On May 30, 2012, the Court granted Plaintiffs' renewed request for a TRO (Doc. 48) preventing the Estate from dismissing its claims in the Malpractice Litigation and enjoining the Estate from accepting any settlement offer that does not fully compensate the Plan without the Plan's written approval. (Doc. 48 at 7.) On August 3, 2012, the Court ruled that the TRO should remain in effect as a Preliminary Injunction and that the Estate was enjoined from dismissing its claims against Feuer and Valley Anesthesiology in the Malpractice Litigation, as well as from accepting any settlement of its claims against Feuer and Valley Anesthesiology that does not fully compensate the Plan without the Plan's written approval. (Doc. 62 at 9-10.) Defendants challenged the Preliminary Injunction in the Ninth Circuit on the grounds that the Court did not have jurisdiction and the Estate was not a "covered person" under the terms of the Plan. The Ninth Circuit affirmed the Court's decision." (Doc. 91-2 at 3.)

Both parties have now moved for summary judgment. Plaintiffs seek equitable relief in the amount of $1, 144, 862.20, plus costs, interest and attorneys' fees. Defendants seek to have this action dismissed.

DISCUSSION

I. Legal Standard

Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Substantive law determines which facts are material and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "A fact issue is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (quoting Anderson, 477 U.S. at 248). Thus, the nonmoving party must show that the genuine factual issues "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'" Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987) (original emphasis omitted) (quoting Anderson, 477 U.S. at 250).

II. Analysis

There are no major facts in dispute. Section 502(a)(3) allows an ERISA plan to obtain appropriate equitable relief to enforce the terms of the plan. 29 U.S.C. § 1132(a)(3).[1] Equitable relief for reimbursement under § 502(a)(3) does not include "personal liability" for the benefits conferred by a plan to a participant, but does include rights to reimbursement of "specifically identifiable funds that were within the possession and control of the [beneficiaries]." Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356, 362-63 (2006) (internal citations omitted). Sereboff held that where, as part of an ERISA plan, a beneficiary agrees to convey funds to ...

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